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When do I pay the credit cards when I face financial challenges?

On behalf of The Smith Law Offices, P.C. posted in Credit Card Debt on Friday, October 17, 2014.

People who live in the vicinity of Detroit know that the city and its surrounding communities have faced tough economic times. Because of this, many residents may find themselves facing a financial challenge that leaves them overwhelmed by the debt and other financial obligations that they have to meet.

In the short term, the situation may leave a family wondering which bills to pay first and which bills can wait. The short answer to this question is that the family should pay those bills and expenses that they must pay in order to survive. On a practical level, this means that a family should pay for things like food and adequate shelter. Because it is such an essential part of modern society in the United States, a family also needs to pay to keep their vehicle in good working order and on the road. As they are now required to do by law, families also will want to keep up on health insurance.

With respect to other debts, a family should look over the obligations first. For a secured loan, like a mortgage or a car payment, a family will ordinarily want to keep paying at the risk of losing their home or vehicle. The exception to this rule is when the family may have a vacation home or a vehicle that it can reasonably spare. Credit cards ordinarily have low priority.

One thing that is very important to remember is not to draw out of a retirement account. Generally speaking, these are ordinarily protected in a Chapter 7 bankruptcy, and it may be better to file a bankruptcy before pilfering one's retirement savings.

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